Volkswagen ID.4 and ID.5 to be cheaper than expected

Volkswagen Australia has ruled out a price war with Tesla as it prepares to open the order books on the upcoming VW ID.4 and ID.5 mid-size electric SUVs.

But the company admits the mooted $75,000-plus starting price for its first EVs will be significantly undercut as the German brand reacts to increased discounting and competition in the electric car market.

Australian order books for the Volkswagen ID.4 and its sleeker-looking sister model, the ID.5, will open in July and the company says it will leave it until the last minute to fix pricing for the crucial new models.

On sale in Europe, North America and China since 2021, the ID.4 and ID.5 will be the first battery-electric vehicles to be offered by Volkswagen in Australia and they will arrive here in upgraded form as revealed in Europe in October 2023.

The news comes as Tesla Australia slashes up to $5000 from the prices of its entry-level Model 3 and Model Y in the face of increasing competition and fresh arrivals in the EV space.

“We need to get this price right and this is very much a high focus from the brand,” said Ralph Beckman, general manager of marketing and product for passenger vehicles at Volkswagen Australia.

Beckman was adamant Volkswagen wouldn’t follow Tesla down – and down further – to the current start price for the Model Y, the ID.4’s most dominant rival. This week the base Model Y Rear-Wheel Drive hit a record low price of $55,900 before on-road costs.

“We’re not going to enter a price war,” said Beckman. “There’s far more to the package than just product. It’s a value proposition rather than entering a price war.”

Part of that value proposition is a just-inked deal with AmpCharge, the EV charging arm of Ampol.

Volkswagen will offer discounted public charging and discounted wallbox chargers, although the pricing for each is yet to be announced.

Customers will also be able to colour-match their home/work chargers to one of five Volkswagen paint hues.

Volkswagen says it is working on other collaborations to further incentivise ID.4 and ID.5 buyers before pre-sales open in July.

While Beckman and Volkswagen’s product manager for passenger vehicles, Michelle Rowney, wouldn’t elaborate on pricing, they gave enough hints to confirm that pricing will be much sharper than what the brand alluded to earlier this year.

“I wouldn’t listen to anything we’ve previously hinted at,” said Rowney amid a fast-changing EV market, before refusing to go into details.

“It’s different to what we alluded to before,” she added of the yet-to-be-confirmed pricing, reaffirming that the brand wouldn’t simply chase Tesla on pricing.

“Our current position is based on what the market’s doing.

“We’re going to make sure that our pricing is sustainable and we’re not going to release pricing until we’re sure we’ve got the right price point for the market.”

Beckman said Volkswagen had monitored the price drops across the EV industry and was focussed on setting sensible pricing for the ID.4 and ID.5, which will initially come into Australia with a high level of equipment.

“The key here is to land for these cars on a sustainable strong price point that we can keep in market,” he said.

“The last thing we want to do is launch a price point then a few months down the track react and discount it significantly, like we’ve seen in the industry in some cases.”

Ford and Subaru were forced to adjust prices for their respective Mustang Mach-E and Solterra models between announcing the initial pricing and delivering the first cars to customers.

But it’s Tesla that has been the most active with price drops, with multiple price reductions across the Model 3 and Model Y over the past 18 months. The most recent price drop was this week, once again spurring debate about the effects of price cuts on residual values.

Volkswagen says that is top of mind when it comes to the positioning the ID.4 and ID.5 in the local market.

“It’s really paramount to protect our customers that are buying this product and their residual value in future,” said Beckman.

Rowney said the mid-term plan is to bring in more affordable variants of the ID.4 and ID.5 once they are settled into the market.

But don’t expect the ID.4 or ID.5 to immediately convert the majority of Volkswagen buyers to EV ownership.

While Volkswagen Australia sees the electric SUV pair as a significant volume opportunity, Rowney said the company will still initially sell more examples of the Tiguan – the brand’s comparably-sized combustion-powered SUV – than ID.4s and ID.5s.

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